A Project Has Average Net Income of $6,250 a Year

question 83

Multiple Choice

A project has average net income of $6,250 a year over its 6-year life. The initial cost of the project is $98,400 which will be depreciated using straight-line depreciation to a book value of zero over the life of the project. The firm set a minimum average accounting return of 12.5 percent. The firm should ________ the project because the AAR is ________ percent.

• A) accept; 12.52
• B) accept; 12.46
• C) accept; 12.70
• D) reject; 12.46
• E) reject; 12.70

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Definitions:

Con-man

A person who deceives others by lying or tricking them, often to gain money or advantage.

Remorse

A deep feeling of regret or guilt for a wrong committed.

Anorexia Nervosa

An eating disorder characterized by an obsessive fear of gaining weight and a refusal to maintain a healthy body weight.

Impulsive

Acting on spontaneous desires and feelings without considering the consequences or the appropriateness of the action.